Institutionalize Your Success
Jan 02, 1995
If you are like a lot of our clients, 1994 was a really great year. For many firms, all indicators were up— including sales, backlog, revenues, and profitability.
Our ZWEIG 100 index (based on 100 typical firms representing all corners of the industry) offers further evidence of how good 1994 was in our. In our last report, (published in the issue prior to this one), backlog increased by five points over the past 12 months, and revenues jumped eight points over the same period. On top of that, both short- and long-term management optimism levels have never been higher.
When times are this good, the really well-managed companies will seize the opportunity to ensure their long-term futures. They do this by what we refer to as “institutionalizing” their success. And this “institutionalization” is becoming an overriding strategy that influences every single decision they make.
“Institutionalizing” is getting your firm to the point where it can be successful without you having to maintain a 150% motivation level every day, or work 70 hours every week. It means you can go away on business or pleasure trips for extended periods and come back to find that everything is still going well. It means you can pick and choose the work activities that you personally want to be involved in, instead of doing what you have to in order to survive. But perhaps more importantly, when you institutionalize your success, you will have created something— a firm— that has real value without your involvement. That will ensure your ability to sell your stock in the company for a good price, whether to an inside or outside buyer.
Here are some areas to look at if you want your success to become more automatic, and your firm’s management approach more institutional. For each one, the typical management approach is listed first, followed by the problem with that approach. The institutional management approach to the same issue or problem follows. See how your firm stacks up:
ACCOUNTING
Typical approach: Give people the least amount of information they need to do their job. Problem— They become disconnected from the firm as a whole and focus only on their immediate area.
Institutional approach: Give people information on how the firm as a whole is performing. This gets them thinking outside of their own little box, and connects them with the firm as a whole. It improves decision-making, and increases employee awareness of problems to be fixed, without management having to bring it to their attention.
ORGANIZATION
Typical approach: Have a matrix structure. Assign each project as it comes in to a project manager (PM) who then builds a one-time team based on who is available at that time. Problem— This approach requires constant management involvement to assign jobs and resolve resource disputes.
Institutional approach: Divide the company or office into specialized standing teams or studios headed up by a PM or principal. Let each PM/team leader schedule his or her own work. This approach makes project assignments automatic, since individual jobs go to the team that does that type of work. Team leaders work with each other to resolve peaks and valleys without top management involvement.
COMMUNICATIONS
Typical approach: Send out memos. Have group meetings with the CEO. Problem— Memos are impersonal, not to mention the fact that many memo-senders (even CEOs) are poor writers whose message is not always clear. And group meetings rarely produce an honest response to a problem.
Institutional approach: Install an E-Mail system for immediate notification of new jobs sold, accolades or criticisms received from clients, and so on. Consistently post a report on summary performance data for the firm as a whole. Have principals and other managers get out of their offices and take employees out to lunch regularly. These things help keep employees and top management alike from getting isolated.
CAREER DEVELOPMENT
Typical approach: Have immediate supervisors conduct annual performance appraisals where long-term goals are established. Problem— Performance appraisals are O.K., but they are only an opportunity to tell the employee how he or she is doing from the immediate supervisor’s perspective. From the employee’s point of view, the supervisor may be a longer-term problem for the employee if he or she is to stay on.
Institutional approach: Have someone other than the employee’s immediate supervisor talk with him about what he wants to do over the long haul, and then try to make that possible. Make sure these meetings are scheduled and happen throughout the year.
TRAINING/PROFESSIONAL DEVELOPMENT
Typical approach: Let people join a professional organization if they want to. Encourage the writing of professional papers. Problem— This approach relies on the employee to initiate the request for training, as opposed to management.
Institutional approach: Training is a planned activity. The firm has a process for regularly identifying weaknesses in its employees and determining who gets what training.
CLIENT DATABASE
Typical approach: Restrict access to the list. Funnel all changes through one person. Problem— The list is never up-to-date. The one person who is supposed to maintain it falls behind; changes aren’t supplied to that person because it’s a hassle.
Institutional approach: Put a computer on everyone’s desk. Have one list that all employees can use and update. Get rid of the Rolodex. Now the company keeps all of the employee’s contacts, even if he or she leaves the firm.
SELLING
Typical approach: Only allow the principals to sell. Make it a requirement that you cannot be a principal if you can’t sell. Problem— If only principals can sell, and selling is a prerequisite to becoming a principal, the firm will never add another principal. Also, if principals are the only ones who sell, the company will not be worth as much to an outside buyer who will assume that the principals will be less motivated after the sale.
Institutional approach: Get everybody selling. This makes the firm more resilient and more likely to weather peaks and valleys. It also makes it more attractive to an outside (or inside) buyer.
MANAGING
Typical approach: Principals hold all management jobs. Problem— This holds the company back because employees in the level directly below the principals never build any management capability. It virtually ensures that the principals cannot get away from the company and ties all of the firm’s value to them.
Institutional approach: Get other people involved in management if they show an interest in it and aptitude for it, and if there’s an opportunity to try them out.
INCENTIVE COMPENSATION
Typical approach: Have the principals sit around a table and decide who gets how much bonus at the end of each year. Problem— This unplanned approach to bonuses is an ineffective staff motivator— there’s no direct link between a particular behavior and the reward. The outcome (bonus) is not tied to any specific behavior. And, it requires management to make the tough decisions on who gets how much every time.
Institutional approach: Set up a bonus plan that ties everyone into the overall company profits, their office’s profits, and their team’s profits. To encourage cooperation and big-picture thinking, the biggest share of the bonus should be the overall company one. Show accrued bonus monthly, and pay out bonuses quarterly based on a formula.
When times are good, think long-term. Build a company that can survive without you, and you’ll be well-rewarded in the end. Because if you take the short-term, traditional management approach, you’ll probably end up with a machine that breaks down the minute you stop oiling it.
Originally published 1/02/1995.
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.